Oil falls below $61 after rise to six-month peak

By IBT Staff Reporter On 05/21/09 AT 5:48 AM

Oil fell more than a dollar to below $61 a barrel on Thursday, after hitting a six-month high in the previous session.

U.S. crude for July delivery was down $1.37 a barrel at $60.67 by 0927 GMT (5:27 a.m. EDT). It had settled at $62.04 a barrel, before trading up to a six-month high of $62.26 in post-settlement activity. London Brent was down $1.35 at $59.24.

Oil has nearly doubled since December, despite weak demand and high fuel inventories.

A rally in equity markets has partly inspired oil's gains in anticipation of a recovery in world economic growth and oil consumption.

While it may seem at odds with recent demand data and high levels of global inventories, we believe the economic outlook is improving and a second half recovery, perhaps more vigorous than even we foresee, is on the cards, JP Morgan said in a note.

The bank also raised its 2009 and 2010 oil price forecasts.

We're now trading at levels people were predicting for the end of the year, said Tony Nunan, risk manager at Mitsubishi Corp in Tokyo.

But we might see a sell-off toward the end of the month as the driving season in the U.S. begins only in June after Memorial Day, and if the reality of summer demand is not as strong as the market has anticipated.

Crude oil and gasoline stockpiles in the United States tumbled sharply last week, according to the U.S. Energy Information Administration, with crude declining 2.1 million barrels and gasoline falling 4.3 million barrels.

Bullish investor sentiment about the global economic outlook showed signs of moderating after the United States cut its growth forecasts for the next three years and credit rating agency Standard & Poor's cut its outlook on the United Kingdom to negative from stable.

This knocked European equity markets, ending a five-day advance.

The Organization of Petroleum Exporting Countries, which has agreed to cut 4.2 million barrels per day of output since September in a bid to prop up oil prices, will meet on May 28 to discuss output policy.

Ministers have said they saw no need to cut production further.

Weekly U.S. jobless claims and April leading indicators are due later on Thursday, which could give more clues on health of the economy in the world's top energy consumer.